ICICI Prudential emerges lowest bidder to manage SUUTI’s ETF

ICICI Prudential AMC has emerged as the lowest bidder for managing exchange-traded fund (ETF) that the government plans to float for disinvestment of its holdings under the Specified Undertaking of Unit Trust of India.

The fund manager will assist the government in sale of residual stakes in ITC, L&T and Axis Bank.

The Government of India holds these shares - 11.27 per cent in ITC, 8.18 per cent in L&T and 11.66 per cent in Axis Bank - through Specified Undertaking of UTI (SUUTI).

As many as seven asset management companies (AMCs) -- Reliance Mutual Fund, Birla Sun Life MF, Kotak Mutual Fund, SBI Mutual Fund, UTI Mutual Fund and Sundaram Mutual fund in consortium with Edelweiss Mutual Fund had participated in this bidding process.

According to sources, ICICI Prudential AMC emerged as the lowest bidder after the financial bids were opened today.

Earlier during the technical bidding round, SBI MF had come on the top.

The selected fund house, which would be finalised after deliberations by SUUTI's board and other officials, will act as the manager for the new ETF, which is expected to hit the market in the last quarter of the current financial year (2014-15).

ICICI Securities is advising the government for selection of a fund house for managing an ETF for monetising these SUUTI shares.

The government had sold 9 per cent stake in Axis Bank held through SUUTI in March this year through the bulk deal on the stock exchanges. Formed in 2003, SUUTI is an offshoot of the erstwhile UTI (Unit Trust of India).

The proposed ETF will serve as an additional mechanism for the government to monetise its shareholdings in SUUTI and other selected CPSEs that eventually form part of the ETF basket.

As per the bid documents, the ETF could be launched as a New Fund Offer (NFO) followed by further tranches and/or a tap structure, and SUUTI and government may provide appropriate discount for different investors, in the form of a suitable mix of upfront and back-end loyalty discount.

The proposed ETF will be launched as a close-ended structure.

In March, the government had successfully launched the ETF comprising shares of 10 PSUs. The ETF has registered handsome gains since its launch.

The government proposes to raise Rs 15,000 crore in the current fiscal through sale of residual stakes in private companies. It plans to raise Rs 43,425 crore through stake sale in PSUs.

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